What should you know?
The first rule of financial planning is to spend less than you earn.
This age-old rule refers to your regular salary but shouldn’t include variable bonuses.
Bonuses, while hard earned, should not be considered as part of your recurring income as they are not guaranteed.
Why should you care?
You should always aim to comfortably cover essentials and the cost of your lifestyle from your regular salary payments.
Relying on your bonuses to fund lifestyle costs is typically a sign that your finances are misaligned and need adjusting.
If you depend on your bonus to cover excessive regular expenditures, you could find yourself in a very difficult situation if your bonus comes in lower than you expect.
It is best to view bonuses as one-off capital injections, to be used constructively. Paying for special experiences, upskilling yourself for a career change or investing for your future.
